FY2017 Q2 Financial Results Director, Corporate Executive Vice President, and General Manager of the Finance & Procurement Hiroyuki Ogiwara November 2, 2017 FURUKAWA ELECTRIC CO., LTD
Forward-Looking Statements Projections of future sales and earnings in these materials are forward-looking statements. Management offers these projections in good faith and on the basis of information presently available. Information in these statements reflects assumptions about such variables as economic trends and currency exchange rates. Forward-looking statements incorporate known and unknown risks as well as other uncertainties that include, but are not limited to, the following items. Economic trends in the U.S., Europe, Japan and elsewhere in Asia, particularly with regard to consumer spending and corporate expenditures. Changes in exchange rates of the U.S. dollar, euro, and Asian currencies. Furukawa Electric Group s ability to respond to rapid advances in technology. Changes in assumptions involving financial and managerial maters and the operating environment. Current and future trade restrictions and related matters in foreign countries. Changes in the market value of securities held by the Furukawa Electric Group. Due to the above factors, actual sales, earnings, and other operating results may differ significantly from Looking Statements in these materials. In addition, following the release of these materials, Furukawa Electric Group assumes no obligation to announce any revisions to forward-looking statement in these materials Copyrights Furukawa Electric Co.Ltd. retains copyrights and other rights involving these materials. Copyright and otherwise reusing these materials in any way without prior consent is prohibited. 2
FY2017 First half results -P/L Summary FY16H1 FY17H1 FY17H1 * Results Previous forecasts Results a b c c-a c-b Net sales 397.6 450.0 457.5 +59.9 +7.5 See page 5 (JPY billion, JPY/kg, JPY/USD) Operating income 13.3 20.5 21.8 +8.5 +1.3 +8.5 (+64%) Profit/loss in equity method affiliates YoY changes Change from the forecasts (Ratio) 3.3% 4.6% 4.8% +1.4 +0.2 See page 6 1.0-2.0 +3.0 - Foreign exchange gain/loss 1.2-0.6 +0.6 - Ordinary income 10.2 20.0 22.1 +11.9 +2.1 +11.9(+117%) (Ratio) 2.6% 4.4% 4.8% +2.3 +0.4 Extraordinary income/loss 1.6 5.5 6.1 +4.5 +0.6 Details of the YoY changes (H1 results) Extraordinary income +2.5 (4.5 7.0) Income taxes 3.0-5.0 +2.0 - Net income attributable to non-controlling interests Net income attributable to owners of the parent 2.1-1.6 0.5-6.7 19.5 21.7 +15.0 +2.2 (Ratio) 1.7% 4.3% 4.7% +3.1 +0.4 Extraordinary loss +2.1 ( 2.9 0.8) +15.0 (+225%) Average copper price 544 648 709 - - Average exhange rate 105 108 111 - - * Previous forecasts:announced on 8/2 at FY2017Q1 financial results briefing 3
Intentionally Blank 4
Analysis of Changes in Net Sales(YOY) +59.9 0 5
Analysis of Changes in Operating income(yoy) +8.5 0 6
Breakdown by Segment; FY2017 First half results FY16H1 FY17H1 FY17H1 Results Previous forecasts Results YoY changes Changes from the forecasts Infrastructure 122.5 140.0 140.9 +18.4 +0.9 Communications Solutions 79.8 90.0 90.9 +11.1 +0.9 Energy infrastructure 42.7 50.0 50.0 +7.3 +0.0 Net sales Operating income Electronics & Automotive Systems 215.2 245.0 248.3 +33.1 +3.3 Automotive Products & Batteries 104.7 115.0 114.0 +9.4 1.0 Electronics Component Materials 110.5 130.0 134.3 +23.8 +4.3 Functional Products 65.9 70.0 74.5 +8.6 +4.5 Service and Developments, etc. 23.9 25.0 25.5 +1.6 +0.5 Elimination of intra-company transactions 29.9 30.0 31.7 1.9 1.7 Total 397.6 450.0 457.5 +59.9 +7.5 Infrastructure 5.3 8.0 8.0 +2.6 0.0 Communications Solutions 5.8 8.0 8.1 +2.2 +0.1 Energy infrastructure 0.5 0.0 0.1 +0.4 0.1 Electronics & Automotive Systems 3.3 6.5 7.2 +3.9 +0.7 Automotive Products & Batteries 2.7 4.5 4.8 +2.1 +0.3 Electronics Component Materials 0.6 2.0 2.4 +1.8 +0.4 Functional Products 5.0 6.5 7.0 +1.9 +0.5 Service and Developments, etc. 0.4 0.5 0.4 +0.0 +0.1 Elimination of intra-company transactions 0.0 0.0 0.0 0.0 +0.0 Total 13.3 20.5 21.8 +8.5 +1.3 7
FY2017 First half results -B/S Summary End of FY16Q4 End of FY17Q2 Changes Details of the changes a b b-a Current assets 382.4 413.4 +31.0 Inventories +13.8 Cash and bank deposits 47.2 53.1 +5.9 Notes and accounts receivable trade 198.9 210.0 +11.1 Non-current assets 367.7 378.5 +10.7 Increased by sales increase Tangible fixed assets 205.5 213.8 +8.3 Intangible fixed assets 9.7 9.7 0.1 Investments and other assets 152.5 155.0 +2.5 Total Assets 750.1 791.8 +41.7 Impact of new consolidation +5.6 Current liabilities 293.4 307.8 +14.4 Increased by sales increase Non-current liabilities 219.7 221.9 +2.1 Total Liabilities 513.1 529.7 +16.6 Shareholders' equity 194.3 211.6 +17.4 Accumulated other comprehensive income 12.4 16.2 +3.8 Net income attributable to non-controlling interests 30.3 34.3 +4.0 Total Net assets 237.1 262.2 +25.1 Total Lianbilities and Net assets 750.1 791.8 +41.7 Interest-bearing liabilities 252.5 269.2 +16.6 Impact of new consolidation +3.5 Capital ratio 27.6% 28.8% +1.2 NET D/E ratio 0.99 0.95 0.04 Total Assets: increased from end of FY2016 due to an increase in sales and rising copper prices Interest-bearing liabilities: free cash flow is in deteriorating trend due to an increase in working capital 8
Revision of FY2017 Full year forecasts -P/L Summary * Revised FY2017forecast of net sales (JPY billion, JPY/kg, JPY/USD) FY16 FY17 FY17 YoY Changes from Previous Results New forecasts changes previous forecast forecasts a b c c-a c-b Net sales 843.3 915.0 * 925.0 +81.7 +10.0 Operating income 38.6 43.0 43.0 +4.4 - (Ratio) 4.6% 4.7% 4.6% +0.1 0.1 Profit/loss in equity method affiliates 0.1 - - - - Foreign exchange gain/loss 1.2 - - - - Ordinary income 36.0 43.5 43.5 +7.5 - (Ratio) 4.3% 4.8% 4.7% +0.4 0.1 Extraordinary gain/loss 8.1 6.5 6.5 +1.6 - Income taxes Net income attributable to non-controlling interests Net income attributable to owners of the parent 5.5 - - - - 4.9 - - - - 17.6 25.5 25.5 +7.9 - (Ratio) 2.1% 2.8% 2.8% +0.7 0.0 Average copper price 604 637 717 Average exhange rate 108 107 108 ( H1:709 / H2 Assumptions:725) ( H1:111 / H2 Assumptions:105) 9
Breakdown by Segment; Revision of FY2017 Full year forecasts FY16 FY17 FY17 Results Previous forecasts New forecasts YoY changes Changes from previous forecasts Infrastructure 263.8 295.0 285.0 +21.2 10.0 Communications Solutions 168.5 185.0 175.0 +6.5 10.0 Energy infrastructure 95.3 110.0 110.0 +14.7 0.0 Net sales Operating income Electronics & Automotive Systems 455.5 490.0 515.0 +59.5 +25.0 Automotive Products & Batteries 223.4 235.0 240.0 +16.6 +5.0 Electronics Component Materials 232.1 255.0 275.0 +42.9 +20.0 Functional Products 131.5 140.0 145.0 +13.5 +5.0 Service and Developments, etc. 49.7 50.0 50.0 +0.3 0.0 Elimination of intra-company transactions 57.0 60.0 70.0 13.0 10.0 Total 843.3 915.0 925.0 +81.7 +10.0 Infrastructure 14.3 16.3 13.3 1.0 3.0 Communications Solutions 14.2 16.8 14.1 0.1 2.7 Energy infrastructure 0.1 0.5 0.8 0.9 0.3 Electronics & Automotive Systems 12.8 15.0 17.5 +4.7 +2.5 Automotive Products & Batteries 10.1 10.5 12.8 +2.7 +2.3 Electronics Component Materials 2.7 4.5 4.7 +2.0 +0.2 Functional Products 11.7 12.5 13.0 +1.3 +0.5 Service and Developments, etc. 0.1 0.8 0.8 0.7 0.0 Elimination of intra-company transactions 0.0 0.0 0.0 +0.0 0.0 Total 38.6 43.0 43.0 +4.4 0.0 10
Net Sales and Operating Income by Segment 1-(1) Infrastructure (Communications Solutions) Net sales < Details of Operating Income difference> H1 result: YoY +2.2 billion yen : Positive growth factors : Negative growth factors Operating income / operating margin Strong demand for optical fiber and cable products has continued Backed by increased adoption of optical transmission, growing demand for network systems in Japan contributed to the result Digital coherent products were affected by prolonged inventory adjustments in the Chinese market, resulting in declines in net sales and operating income H2 forecast: 2.0 billion yen vs. H1 actual Optical fiber and cable: shipments to some clients in North America will temporarily decrease Digital coherent products: despite increasing impact of inventory adjustments, recovery is expected to start in Q4 11
Net Sales and Operating Income by Segment 1-(2) Infrastructure (Energy Infrastructure) Net sales < Details of Operating Income difference> *Acquisition of VISCAS business (domestic underground and undersea cable business ) from FY2016 Q3. H1 result: YoY +0.4 billion yen : Positive growth factors : Negative growth factors Domestic electrical construction contributed to the result Demand for power transmission/distribution products for Japanese electric power companies has declined Operating income / operating margin H2 forecast: 0.6 billion yen vs. H1 actual The product mix will deteriorate due to exports of underground cables Sales from power transmission/distribution products will increase due to seasonal factors 12
Net Sales and Operating Income by Segment 2-(1) Electronics & Automotive systems (Automotive Products & Batteries) Net sales < Details of Operating Income difference> H1 result: YoY +2.1 billion yen : Positive growth factors : Negative growth factors Operating income / operating margin Demand for automotive parts in Japan recovered mainly due to the impact of the Kumamoto earthquake in April 2016 Newly adopted our wire harnesses to new car models by car makers Efforts for improving cost of sales by increasing production efficiency and reducing logistics costs continued to the result H2 forecast: +3.2 billion yen vs. H1 actual Income from batteries will increase due to seasonal factors The impact of the adoption of wire harnesses for new car models will further increase 13
Net Sales and Operating Income by Segment 2-(2) Electronics & Automotive systems (Electronics Component Material) Net sales *Main factor of the sales increase is raise of copper price * * < Details of Operating Income difference> H1 result: YoY + 1.8 billion yen : Positive growth factors : Negative growth factors Operating income / operating margin As for Copper & High Performance Material Products division, demand increased, and a temporary increase in costs associated with development projects last year has been corrected Magnet wires for vehicles and smartphones delivered a strong result H2 forecast: 0.02 billion yen vs. H1 actual In Wrought copper products business, income will maintain same level from H1 since demand for some products will increase while there will be negative impact in some other products by seasonal factors 14
Net Sales and Operating Income by Segment 3 Functional Products Net sales < Details of Operating Income difference> H1 result: YoY +1.9 billion yen : Positive growth factors : Negative growth factors : Positive growth factors : Negative growth factors Copper foils delivered strong results, due to steady demand, increased productivity, and improvement of product mix As for Thermal Management Solution & Products division, demand for products for data centers increased Operating income / operating margin H2 forecast: 0.9 billion yen vs. H1 actual As for Thermal Management Solution & Products division, after the strong demand for products for data centers in H1, demand will decrease due to temporary customer inventory adjustments Sales of tapes for semiconductor manufacturing will be further affected by intensification of competitive environment 15
CAPEX, Depreciation & amortization and R&D -FY2017 first half results and revised forecasts for the year FY16H1 FY17H1 YtoY FY16 FY17 FY17 Results Results changes Results Previous forecasts New forecasts YoY changes Changes from previous forecasts a b b-a c d e e-c e-d CAPEX 11.6 15.9 +4.3 31.6 38.0 42.0 +10.4 +4.0 Depreciation and amortization 11.5 12.3 +0.8 23.4 26.5 26.5 +3.1 ー R&D expenses 8.4 9.4 +1.1 17.5 19.4 19.4 +1.9 ー *Released on September 13; including additional investments for increases in production of optical fibers and cables 16
(Appendix) Segments and Business Divisions Segment Sub-segment Business Division Infrastructure Electronics & Automotive Systems Functional Products Communications Solutions Energy Infrastructure Automotive Products & Batteries Electronics Component Material Optical Fiber and Cable Products FITEL Products Broadband Solutions Business Power Cable Industrial Cable & Power Cable Accessories Automotive Products Batteries Electric Conductor Magnet Wire Copper & High Performance Material Products Copper Tube AT & Functional Plastics Thermal Management Solution & Products Memory Disk Copper Foil Service and Developments, etc. 17
Thank you very much for your attention. 18